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Potential of Gruyere Deposits Enhanced by $350M Joint Venture

THE INSIDE STORY: Gold Road Resources (ASX: GOR) has developed a well-earned reputation for being a company that delivers on what it sets out to do – with interest.

Gold Road Resources made no secret it was exploring the option of bringing in a Joint Venture partner to assist in developing its 6.2 million ounce Gruyere gold project in Western Australia.

The identity of that partner was revealed when Gold Road announced a 50:50 Joint Venture with a wholly-owned Australian subsidiary of Gold Fields Limited for the development and operation of the Gruyere gold project.

Under the terms of the Gruyere Joint Venture (GJV), Gold Fields will purchase a 50 per cent interest in the Gruyere gold project for the price of $350 million, comprising $250 million payable on completion of the transaction, expected in December, and $100 million contributed by Gold Fields to fund Gold Road’s initial cash calls during the construction phase.

“We started the JV process, formally, after the PFS was published in February,” Gold Road Resources managing director & CEO Ian Murray told The Resources Roadhouse.

“We had approaches from major companies last year who wanted to have a look at Gruyere and we discussed what options would suit us best and to look at potential JV partners in parallel with the project finance process.

“Gold Fields was there from the beginning, we had invited companies we thought we could work with and along the way there were certain companies that we didn’t think would fit.

“As we finalised the Feasibility Study that’s when the final negotiations were held on the JV.

“We can now say, hand on heart, Gruyere is a world-class deposit – the final proof of that being Gold Fields coming in and spending $350 million to participate in its development.”

The announcement of the JV quickly followed completion of a Feasibility Study on the Gruyere project, which confirmed it to be one of Australia’s most significant undeveloped gold deposits with an Ore Reserve in excess of 3.5 million ounces underpinning average annualised gold production of 270,000 ounces over an initial 13-year Mine Life with a 15 year project Life.

Gold Road has always known where it wanted to take the Gruyere deposit, and had done as much as it could to ensure it brought to the project to a stage that provided it with a negotiating position as strong as that of any potential suitor.

“We held onto the project as long as we did as we wanted to get as much information and surety and de-risk it as much as possible, which in our view was going to add as much value to the project for any sort of JV or sale point,” Gold Road Resources executive director – exploration & growth Justin Osborne told The Roadhouse.

“Rather than be one of those cases, where a junior might get a major partner to come in at a much earlier stage and end up with 20, 30 or 40 per cent, we put ourselves in a position of greater negotiating power by having already done all the work that de-risked the project and proved its value.”

Following the completion of the transaction, and with around $79.1 million already in the bank, Gold Road’s financial position is very strong.

The company is fully funded for its share of construction capital for the development of the Gruyere project and to conduct further exploration programs across its now-50 per cent owned Gruyere JV tenements, 100 per cent-owned North Yamarna tenements and 50 per cent-owned South Yamarna JV tenements.

Gold Road is now free to carry out further exploration on the other deposits within the Gruyere JV tenements to supplement ore feed from the planned Gruyere open pit, with its immediate attention focused on the Attila, and Alaric deposits.

Attila and Alaric contain a combined JORC 2012 Resource of 270,000 ounces of gold at an average grade of 1.59 grams per tonne gold.

16ATDD0006 9 metres at 4.3 grams per tonne gold from 130m, including 3.9m at 9.4g/t gold;

16ATDD0017 9m at 3.5g/t gold from 160m, including 1m at 25g/t gold;

16ATRC0015 8m at 2.2g/t gold from 75m; and

16ATRC0014 13m at 1.9g/t gold from 96m.

“We had not drilled at Attila for a long time, perhaps five years or so, and the results we achieved there have demonstrated extensional potential, meaning there is definite potential there to expand on the current Resource,” Osborne explained.

“Attila is a pretty big deposit in its own right – the Resource shell is almost two kilometres long and has been drilled down, so far, to around 90 metres.

“The latest drilling we have conducted around the edges of that, at depth, has demonstrated the mineralisation to be extending, so we are looking at what would be considered to be quite a substantial pit anywhere in the Goldfields region.”

Gold Road’s opportunity to enhance the economics of the Gruyere project was demonstrated by drilling at the Alaric deposit, which was not included in the recent FS.

The current open pit Mineral Resource at Alaric is located on a granted mining lease with a Native Title Mining Agreement.

The recent program consisted 22 Reverse Circulation (RC) and diamond holes to infill and extend continuous structurally controlled gold mineralisation, which identified high-grade mineralisation on the Main Shear and Hangingwall Structures below the current open pit resource, to the limit of current drilling at only 160m below surface.

High-grade mineralisation was confirmed on Hangingwall Structures, with results including:

16ALRC0184 2m at 10.7g/t gold from 89m; and

16ALRC0189 3m at 7.6g/t gold from 148m.

“Alaric is different again in that its potential lies in mineralisation extended at depth as a potential underground resource,” Osborne said.

“At Alaric we have identified is a very coherent mineralisation on a footwall structure over about 700 metres of strike, continuous over that length at average widths of three to five metres at grades on average of around 5.5 grams per tonne

“We have already commenced geological work to refine high-grade shoot controls with the aim of updating the Alaric Mineral Resource in the first half of 2017 with both open pit and underground options likely to be assessed.

“From there we will commence Pre-Feasibility Studies to look at what will be the best option for mining of this deposit.

“Prior to having the Gruyere processing plant potentially available, there was no imperative to go and do any drilling on these other fronts, because they were never going to be economic on their own.

“But with Gruyere, they all become accretive to the overall standing of the project.”